Correlation Between GenMont Biotech and ScinoPharm Taiwan

Can any of the company-specific risk be diversified away by investing in both GenMont Biotech and ScinoPharm Taiwan at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining GenMont Biotech and ScinoPharm Taiwan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GenMont Biotech and ScinoPharm Taiwan, you can compare the effects of market volatilities on GenMont Biotech and ScinoPharm Taiwan and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in GenMont Biotech with a short position of ScinoPharm Taiwan. Check out your portfolio center. Please also check ongoing floating volatility patterns of GenMont Biotech and ScinoPharm Taiwan.

Diversification Opportunities for GenMont Biotech and ScinoPharm Taiwan

0.85

Correlation Coefficient

GenMont Biotech  ScinoPharm Taiwan

Very poor diversification

The 3 months correlation between GenMont and ScinoPharm is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding GenMont Biotech and ScinoPharm Taiwan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScinoPharm Taiwan and GenMont Biotech is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on GenMont Biotech are associated (or correlated) with ScinoPharm Taiwan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ScinoPharm Taiwan has no effect on the direction of GenMont Biotech i.e., GenMont Biotech and ScinoPharm Taiwan go up and down completely randomly.

Pair Corralation between GenMont Biotech and ScinoPharm Taiwan

Assuming the 90 days trading horizon GenMont Biotech is expected to under-perform the ScinoPharm Taiwan. But the stock apears to be less risky and, when comparing its historical volatility, GenMont Biotech is 1.38 times less risky than ScinoPharm Taiwan. The stock trades about -0.03 of its potential returns per unit of risk. The ScinoPharm Taiwan is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,595  in ScinoPharm Taiwan on October 13, 2024 and sell it today you would lose (350.00) from holding ScinoPharm Taiwan or give up 13.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

GenMont Biotech  vs.  ScinoPharm Taiwan

GenMont Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GenMont Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

ScinoPharm Taiwan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ScinoPharm Taiwan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with GenMont Biotech and ScinoPharm Taiwan

The main advantage of trading using opposite GenMont Biotech and ScinoPharm Taiwan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GenMont Biotech position performs unexpectedly, ScinoPharm Taiwan can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ScinoPharm Taiwan will offset losses from the drop in ScinoPharm Taiwan's long position.

The idea behind GenMont Biotech and ScinoPharm Taiwan pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.